There’s a famous saying that goes, “Success leaves clues.”
That means that if you want to be successful in any area, then you want to learn from people who are already successful in that area.
If you want to be a bestselling author, then learn from other bestselling authors.
If you want to be a world-class pianist, then learn from other world-class pianists.
And if you want to be a successful Forex trader, then you want to learn from other successful Forex traders.
In a previous post, I created a list of the Top 10 Traders’ Quotes from some of the best traders in the world.
But those traders traded a variety of instruments like Stocks, Forex, Commodities, Options, and Bonds.
In this post, I will only be using quotes from traders who trade the Forex market.
This way, you will be able to relate to them and improve your Forex trading.
Forex Trading Quote #1: George Soros
I’m only rich because I know when I’m wrong. I basically have survived by recognizing my mistakes.
George Soros is by far the most legendary Forex trader in the world.
Touted as “the man who broke the Bank of England”, he single-handedly took a bet against Britain by Shorting the Pound and made billions.
Taking on a country not only takes guts but a huge conviction!
In this quote that I’ve chosen, it shows that he never lets his ego or conviction overtake what the market is telling him.
That means when he is wrong in his trade, he cuts his losses and gets out of the market.
Many traders often let their ego and pride get in the way of their trading.
For example, whenever you get into a trade, you must always know where your cut-off point is.
That means you need to know when to cut your losses when the market goes against you.
When I was at the prop firm, for some reason, we were never told to put a hard Stop Loss.
But we were expected to manage our risk well.
That means we MUST know exactly when to cut our trade if it goes against us.
And the prop firm takes this seriously.
I remember the very first day I joined the prop firm, a senior trader got fired right in front of my eyes for failing to manage his risk.
He was Long the market and as the market dropped, he kept building up his position.
He was very certain that the market would turn and go back up.
But the market kept going down and put him in a huge drawdown that went past his maximum risk limit.
At that point, he was expected to cut his position…
But he didn’t.
He let his ego get in the way because he had been profitable for the month and he didn’t want this one loss to take away his profits.
So he held on to this trade hoping it would come back.
Our boss saw this on his risk management screen from his room, and he came out of his room looking extremely furious and immediately went to the senior trader’s desk.
He stood beside the senior trader and asked him, “what the f*** are you doing? Are you cutting your position or not?”.
The senior trader just responded, “Yes, I’m getting out.”
The boss then said, “You better close your position or I will do it for you”, and went back to his room.
A few minutes later, the market continued to drop but he still held on to his position as the losses grew bigger.
The boss, monitoring this situation, stormed out of his room and shouted at him to cut his position now.
But the senior trader just froze up and sat there disbelieving what was happening in the market.
The boss then asked him to get out of his seat and sat down in his seat to help him exit his position.
If the boss has to personally help you exit your trades, you know you’re in big trouble.
After that, the boss shouted at him to pack up his stuff and to get the “f” out of the office.
He was fired on the spot.
The boss then warned the rest of us that if any of us do not respect the risk given to us, we will be the next to get fired.
George Soros’ quote basically sums up what the senior trader was missing.
He knew he was wrong but refused to admit it.
And that led him to turn a small loss into a huge loss that not only wiped out all his profits, but also overall put him in the red.
And he got fired.
Don’t be like him.
It’s definitely not worth it to ruin your trading career because of one single trade.
Always cut your losses short.
If you’re wrong, exit the trade.
There are plenty of trades to come.
Forex Trading Quote #2: Bill Lipschutz
If most traders would learn to sit on their hands 50 percent of the time, they would make a lot more money.
Bill Lipschutz has been labeled the “Sultan of Currencies” in The New Market Wizards by Jack Schwager.
So when it comes to Forex trading, he certainly knows what he’s talking about.
This Bill Lipschutz’s quote that I’ve chosen is for the trader who loves to just get into trades.
There are 2 extreme types of traders in the world…
The first type of trader is those who are so afraid of losing that they can’t get into a trade.
This is the type of trader who when a valid trading signal comes up, will have excuses as to why it’s not going to work out.
And thus he misses out on all his trades.
The second type of trader is the opposite.
He is what we call a “trigger-happy” trader.
He will find every reason to get into a trade, even when there is no valid signal.
And this is what Bill Lipschutz is referring to here.
The point he is trying to get across is to only pick the best setups that come your way.
If you go through your trades and analyze your losing trades, you may find a common pattern of getting into trades when you shouldn’t be.
So if you just eliminate those trades, then you will be overall more profitable.
Forex Trading Quote #3: William Eckhardt
Don’t think about what the market is going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there.
I have to say that this is one of my favorite quotes of all time.
This quote has greatly helped me since my prop trading years because it means that you must be prepared for every scenario.
In other words, what William Eckhardt is essentially saying here is that there should be no scenario that should surprise you.
Many times when new traders get into a trade, they keep staring at the charts and start worrying when they see that the market is not behaving in the way they expect.
However, as William Eckhardt says, there is no point worrying.
There’s really only 2 scenarios that can happen:
- Your Take Profit is hit.
- Your Stop Loss is hit.
Everything else is just trade management.
For example, if there’s a piece of high-impact news that’s about to be released, will you tighten your Stop Loss?
Or will you get out of your trade just before the news is released?
Or will you reduce your trade size?
Before you get into a trade, every scenario should have been planned so that nothing can surprise you.
Then once you’re in a trade, all you have to do is manage the trade as per the scenarios that you have already planned for.
Forex Trading Quote #4: Bruce Kovner
Novice traders trade 5 – 10 times too big. They are taking 5 to 10 percent risk, on a trade they should be taking 1 to 2 percent risk on.
Nowadays, there are so many self-proclaimed trading “gurus” on Youtube talking about how they turned $500 into millions of dollars in just a few days.
And many of them even claimed that they did that by trading on their mobile phone.
If you are just starting out and you’re serious about making trading a viable source of income for yourself, then you need to heed Bruce Kovner’s words.
Especially when you’re just starting out, you need to practice good risk management in order to stay in the game long enough to be profitable.
Don’t believe what these charlatans on Youtube are saying.
Instead, be 100% focused on strict risk management for each trade.
And that means that you should only limit your risk to 1 – 2 percent of your trading capital on any single trade.
Any more than that and you’re taking on too big a risk.
Forex Trading Quote #5: Stanley Druckenmiller
It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.
What Stanley Druckenmiller is saying here is that your win-loss ratio is not as important as your profits versus your losses.
Trend-following systems are known for their low win rate.
For example, a typical trend-following system should have a win rate of about 30 percent.
That means out of 10 trades, only 3 on average will be winners.
But that does not mean that trend-following systems are not profitable.
On the contrary, they are very profitable.
And that’s because when they win, they win much more than when they lose.
That’s what Stanley Druckenmiller here is saying.
In the book Trade Your Way to Financial Freedom by Dr. Van K. Tharp, he talks about a trading system’s Expectancy.
The way you calculate a trading system’s Expectancy is using this formula:
(Win Percentage x Average Profit) – (Lose Percentage x Average Loss)
If you noticed, these are the same elements that Stanley Druckenmiller is saying in this quote.
Using this formula, you’d be able to know how much your trading system expects to make or lose on average for each trade.
One of the things that many new traders focus on is on a high win percentage.
But that does not mean you will be profitable.
Let’s assume your trading system has the following traits:
- Win-Loss Ratio of 70-30
- Average Profit $100
- Average Loss $300
By using the Expectancy formula, we get:
(70% x $100) – (30% x $300) = -$20
What this means is that on average, you will lose $20 per trade.
Despite having a high win rate, this trading system is unprofitable.
So a high win rate does not necessarily mean you will be profitable.
And a low win rate does not necessarily mean you will be unprofitable.
It all comes down to what Stanley Druckenmiller here is saying…
And that is “how much money you make when you’re right and how much you lose when you’re wrong.”
Forex Trading Quote #6: Randy McKay
Every trader is going to have tons of winners and losers. You need to determine why the winners are winners and the losers are losers. Once you can figure that out, you can become more selective in your trading and avoid those trades that are more likely to be losers.
While I did try to find Randy McKay’s picture, it seems that he is quite a private person and hence can’t find his picture.
So instead, I used the cover of The New Market Wizards book by Jack Schwager as it was where I got his quote from.
For this quote I’ve chosen, it shows the importance of keeping a journal of your trading.
Many traders don’t have the habit of journaling their trades although they say they are serious about trading.
That’s like saying, “I want to ace my exams but I don’t want to study or do homework.”
Obviously a contradiction and a dumb thing to say.
When you keep a journal of your trades, you’re able to know the mistakes you made and then correct them.
This process of identifying “why the winners are winners and the losers are losers” is so valuable in improving your trading.
As I look through my trades, I could clearly see a pattern in my losing trades.
While we certainly cannot avoid losers, I found out that a portion of my losing trades came from the trades I took when I shouldn’t have.
This happens when I try to “force” a trade.
For example, when I scan through the charts and I see no valid trade setups…
I’d sometimes say to myself, “This looks close enough to be a valid trade setup. Let me try to get into a trade and see how it goes.”
And these types of trades inevitably become unprofitable over the long run.
When I identified this, I immediately stopped doing that and my profitability increased.
But it’s only because I had a journal to track down my trades and analyze them.
So the question is…
Do you keep a journal of your trades?
And if you do, do you analyze why winners are winners and losers are losers?
If not, it’s time to do it.
Forex Trading Quote #7: Scott Ramsey
The market doesn’t care if you lost money on a trade. It doesn’t matter. Think about your next trade. You have to get past the idea that just because you lost money on a trade, it means you failed. Every trading decision you make is subject to some randomness. It doesn’t matter whether you win or lose on any individual trade, as long as you get the process correct.
Scott Ramsey is dubbed the “Low-Risk Futures Trader” in the Hedge Fund Market Wizards book by Jack Schwager because he only risks 0.1 percent on each trade
However, that’s because he manages a sizable fund so while percentage-wise it’s small, nominal-wise it can be pretty huge.
For this quote I’ve chosen, it focuses on your trading psychology.
Trading Forex is not easy as you probably already know by now.
And many traders think that they have to be profitable every month or even every day.
But there are bound to be losing months and days.
So what Scott Ramsey is saying in this quote is to not have unrealistic expectations of trading…
And also to not think of trading as any one single trade.
Instead, view it as a basket of trades.
That means, do not be quick to judge whether your trading strategy or system is profitable or not just from one trade.
But rather, assess it over at least 100 trades.
This way you will be able to get a good idea of whether your trading strategy is profitable or not over the long run.
Many new traders have this mentality that a trading strategy does not work if it has losers.
For example, they will try out a new trading strategy over 3 trades…
And if those 3 trades are all losers, they conclude it to be useless and jump to another trading strategy hoping to find the “holy grail”.
These traders will never be successful and you certainly do not want to be one of them.
The 3 losing trades could simply be just part of a normal losing streak in the trading system.
For example, the trading system could produce a losing streak of 5 trades in a row…
But overall, over a sample size of 100 trades, it could still be profitable.
Another important thing is to not to take losses personally.
Hence Scott said, “You have to get past the idea that just because you lost money on a trade, it means you failed.”
Think of your trading system as an experiment.
That means you separate the trading system’s performance from your own.
If the trading system isn’t profitable after 100 trades, it doesn’t mean you have failed.
It means you just have to continue working on tweaking your trading system until it’s profitable.
As Scott Ramsey said in this quote, “It doesn’t matter whether you win or lose on any individual trade, as long as you get the process correct.”
Whenever the market is closed for the weekends, I would refer to these quotes to reflect on whether I’ve followed the teachings from these quotes.
This has tremendously helped me keep a focused mind when the markets open again.
And I strongly suggest you do the same as well.
So here’s a summary of the quotes in this post:
- “I’m only rich because I know when I’m wrong. I basically have survived by recognizing my mistakes.” – George Soros
- “If most traders would learn to sit on their hands 50 percent of the time, they would make a lot more money.” – Bill Lipschutz
- “Don’t think about what the market is going to do; you have absolutely no control over that. Think about what you’re going to do if it gets there.” – Wiliam Eckhardt
- “Novice traders trade 5 – 10 times too big. They are taking 5 to 10 percent risk, on a trade they should be taking 1 to 2 percent risk on.” – Bruce Kovner
- “It’s not whether you’re right or wrong that’s important, but how much money you make when you’re right and how much you lose when you’re wrong.” – Stanley Druckenmiller
- “Every trader is going to have tons of winners and losers. You need to determine why the winners are winners and the losers are losers. Once you can figure that out, you can become more selective in your trading and avoid those trades that are more likely to be losers.” – Randy McKay
- “The market doesn’t care if you lost money on a trade. It doesn’t matter. Think about your next trade. You have to get past the idea that just because you lost money on a trade, it means you failed. Every trading decision you make is subject to some randomness. It doesn’t matter whether you win or lose on any individual trade, as long as you get the process correct.” – Scott Ramsey
Now I’d like to hear from you…
Which of the quotes above is your favorite?
Let me know in the comments below.
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